Subsidies after Brexit: will the green pound start to wither?

This green and pleasant land is facing some major changes. While the news has been focused on the impact of Brexit on urban industry and businesses like banking and finance, it is the UK’s farmers who are preparing themselves for some of the biggest effects of our split with the EU.

While nobody is arguing that the Common Agricultural Policy has its flaws, it has meant that the UK’s farming industry has been heavily subsidised to the tune of £3bn thanks to CAP. Once we leave the EU, that funding will end. So what, if anything, will be replacing it?

Does it really matter?

Farming is one of the UK’s biggest commercial sectors, and is responsible for billions of pounds worth of income into the country’s economy. It also provides employment for a significant sector of the population, and while the numbers may not be high compared to other industries, employment levels in rural areas (which accounts for more than 60% of the UK) are proportionally dependent on farming and agriculture. So yes, this is an issue that matters a great deal to a very large number of people, some of whom can trace their connection to the land back through several generations.

It is also becoming more of an issue, as British consumers ask where their food will come from post-Brexit if trade agreements aren’t put in place quickly with EU suppliers and partners.

Turning off the CAP tap

However, farmers will have to deal with considerable changes once the fiscal tap is turned off in 2022. While Environment Minister Michael Gove has already tried to reassure farmers that the green pound will not collapse after Brexit, he has indicated that any subsidy payments provided by the UK government as a replacement to the CAP cash-cow will depend not on acreage, as was the case with CAP, but on other aspects such as delivering benefits for nature.

The Brexit deal has given DEFRA the opportunity to reassess how the UK farms. That means reviews on everything from agricultural policies, developing green-field sites, fracking, biodiversity, the use of chemicals, and animal welfare. And while the government is initially promising to match the £3bn in subsidies that farmers would have received from the EU, there may well be a lot more in the way of restrictions and provisos before farmers get their cheques.

Farming good practice

“CAP rewards size of land holding ahead of good environmental practice, and all too often puts resources in the hands of the already wealthy rather than into the common good of our shared natural environment,” said Gove recently. “We need to take the opportunity that being outside the CAP will give us to use public money to reward environmentally-responsible land use,” he added.

So according to Gove, there will be money available, but it’s farming that has to change its practices and methods if it wants to get that financing. And for once, farmers seem to be in agreement with the Environment Minister (which in itself must be a first).

However, they are still concerned that the fundamental point of farming – the production of good quality and affordable food – is being overlooked in favour of more headline-grabbing environmental measures. British agriculture will need to ensure greater levels of food productivity in the coming years, and they may have to do that on tighter budgets than before, despite promises by the government to match the CAP pay-outs.

It’s also worth remembering that EU law also covers a whole slew of other environmental issues, such as water quality, the use of pesticides (the recent ban on neonicotinoids to protect bees is a case in point), air pollution, and the forthcoming battle over fracking. Campaigners are now concerned that without the backing of the EU, and with potential changes being made to environmental legislation under the Great Reform Act, the UK may not be such a green and pleasant land post-Brexit.

Food processors – the biggest losers?

Changes could also affect the food processing industry in the UK, where 60% of exports currently go to the EU. Depending on the outcome of negotiations, this industry could be hit hard by tariff increases, with rises of 48% for processed dairy products, 22% for livestock and 18% for cereals being talked about. That could effectively make exporting food to the EU unprofitable for many processors, and the knock-on effect to farming could be massive.

While farming will continue to be a hugely important part of UK life, there is no question that it will change after Brexit. The question remains just how those changes will take effect, and whether they will be for the better. That really depends on how farming responds, and whether the government keeps the financial promises it has made to the industry.